In the midst of the dramatic showdown in Brussels between the new Greek government and its European creditors, many Greek depositors—spooked by the prospect of a Greek default or, worse, an exit from the euro zone and a possible return to the drachma—have been pulling euros out of the nation’s banks in record amounts over the last few days.
The Bank of Greece and the European Central Bank won’t report official cash outflows for January until the end of the month. But sources in the Greek banking sector have told Greek newspapers that as much as 25 billion euros (US $28.4 billion) have left Greek banks since the end of December. According to the same sources, an estimated 900 million euros flowed out of Greek banks on Tuesday alone, the day after the talks broke up in Brussels, sparking fears that measures will be taken to stem the outflow. On Thursday, by mid-afternoon, deposits had shrunk by about 680 million euros (US $773 million).
“If outflows reach 1 billion euros, capital controls might need to be imposed,” said Thanasis Koukakis, a financial editor for Estia a conservative daily, and To Vima, an influential Sunday newspaper.
On Thursday, Germany rejected Greece‘s application to extend its loan agreement for four months and renegotiate the terms of its bailout, raising the threat of Athens’ running out of money in the coming weeks. Under the current program, the country has received 240 billion euros, or $272 billion, in exchange for pursuing various overhauls.
The situation remains volatile, as the Greek government and its European creditors have not yet managed to reach a deal over financing arrangements concerning the bailout. Greece’s proposal included language that indicated it would not comply with the conditions set in that agreement. The loan agreement formally expires on Feb. 28.
Capital takes flight
With uncertainty clouding the immediate outcome, cash is likely to keep pouring out of Greek banks over the next few days. About 70 percent of the outflows can be attributed to Greek corporate accounts. And most of that is rushing out of the country via electronic transfers to bank accounts elsewhere in the euro zone, Switzerland or the United Kingdom.
But many Greek citizens—who account for about a third of the deposit outflow—seem to be taking their cash out of the bank and placing it in safe deposit boxes or even just taking it home and literally stashing it under their mattresses. Burglaries, not surprisingly, are on the rise.
Earlier this week in the village of Sfinari, outside of the city of Chania in Crete, a 78-year-old man and a 66-year-old woman were found stabbed to death in the bedroom of their home Tuesday. The room, police told reporters, had obviously been searched; a dresser drawer lock was broken, and an intended robbery was the likely motive. Police reportedly found thousands of euros in the couple’s car and elsewhere in the house.
Full article: Worried depositors rush to pull cash out of Greek banks (CNBC)